Employee Health Insurance: Enrollment, Tax Credits & Exchanges

Explore employee health insurance enrollment, tax credits for HRAs, and the world of health insurance exchanges in this comprehensive guide.

How Employees Purchase Individual Health Insurance

With the help of Vitable Health and our broker partners, the enrollment process for employees is quick and straightforward. A member of the Vitable team will meet with each of your employees individually, virtually, or in person. After providing their age, zip code, household income, smoking status, and spouse/dependent’s ages, the Vitable expert will walk them through their top three plan recommendations, helping them find the best plan for them and their lifestyle. The employee will then enroll in health insurance online, either on healthcare.gov for the federal exchange or on a state-based website for the state exchange.

A main factor employers must consider is that the Individual Coverage Health Reimbursement Arrangement (ICHRA) is not a group plan, so employees will be subject to group banding. However, since the ICHRA is customizable, you can set age bands. For example, your older employees' health insurance premiums will be more expensive, and you can offer them a higher reimbursement limit than younger employees. Although there is no age banding on traditional group health insurance, your employees’ age impacts the group health premiums.

Tax Credits for HRAs

Your HRA contribution is 100% tax-deductible. Also, the money you put in your employees’ HRA is not reported as income, so they get tax-free money for their medical needs.

Standard HRA

Those offered a Standard HRA may still qualify for premium tax credits for Marketplace coverage under the ACA. Tax credit eligibility will be determined based on whether the significant medical plan integrated with the HRA is “affordable” under ACA rules.

ICHRA

An individual coverage HRA offer may impact your eligibility for the premium tax credit for Marketplace coverage. The only way you’ll qualify for the premium tax credit to help pay for Marketplace coverage is if you don’t accept the individual coverage HRA, and the individual coverage HRA isn’t considered affordable. For 2025, employees' share of health insurance premium costs cannot exceed 9.02% of their household income.

If the HRA is considered “affordable,” and you accept the HRA, you aren’t eligible for the premium tax credit for your Marketplace coverage. If the HRA includes payments to cover the expenses of your household members, you can’t get a premium tax credit for your household members.

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

Tax credits differ for each HRA type, but for a QSEHRA, you may be eligible for some or no tax credit, depending on whether the QSEHRA is affordable. The 2025 QSEHRA guidelines through Revenue Procedure RP-2024-401 limits will be $6,350 for self-only coverage and $12,800 for family coverage. Reimbursements may be applied toward eligible healthcare expenses as outlined under IRS Section 213(d). To ensure these reimbursements remain tax-exempt, employees must have Minimum Essential Coverage (MEC) in place.

Excepted Benefit HRAs (EBHRA)

The eligibility for the ACA premium tax credit remains unaffected by participation in EBHRA. This applies even to EBHRAs that reimburse eligible medical expenses and cost-sharing, which are not covered by individual health insurance. For plan years beginning in 2025, the maximum amount that may be made newly available for the plan year for an EBHRA under §54.9831-1(c)(3)(viii) is $2,150.

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